1.  CIT Vs. S. M. Construction, I.T.A. No. 412 of 2013, Date of Pronouncement: 03.03.2015, Bombay High Court

Whether imposition of penalty u/s 271(1)(c) is justified, in case  there was complete disclosure of facts and the claim made, though the same was not found acceptable in law?

Held: No

As per the facts of the case, assessee filed its return of income declaring a receipt of Rs. 1.11 Crore as capital receipt as the same was received in lieu of cancellation of an agreement made in earlier years, for which assessee had paid some consideration in the year of agreement. The Ld. AO was of the contention that as the intention of the assessee was to evade tax, thus the assessee is liable to pay penalty u/s 271(1)(c). Whereas, Ld. AR contended that the assessee had made complete disclosure in its return and the claim made was bona fide, penalty may please be removed in view of decision of the Hon’ble Apex Court in the case of CIT vs. Reliance Petroproducts  Pvt.  Ltd. 322 ITR 158.

Hon’ble High Court held that making of an incorrect claim would not tantamount to furnishing inaccurate particulars of income as held by Hon’ble Supreme Court (Supra).

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2.  M/s. Yash Society Vs. UOI & ors., Writ Petition No. 2565/2010, Date of Pronouncement: 12.03.2015, Bombay High Court

Whether denial of exemption u/s 10(23C) is justified where institution is utilising its huge surplus from charitable activities for capital expenses not attributable to philanthropic purpose?

Held_Yes

As per the facts of the case, assessee was a charitable institution engaged in providing hospital facilities for philanthropic purpose. The assessee society applied for exemption u/s 10(23)(via) to the CCIT. The application was denied by the Ld. CCIT after examining the facts that the quantum of increase in fixed assets, cash and bank balances of the assessee show that profit generated out of activities of the petitioner is reploughed to enhance income generation capacity thereby leading to gain in more profits and amounts spent for poor and needy patients was found to be meagre and which clearly indicated that the petitioner did not exist solely for philanthropic purposes. A plain reading of the provisions emphasis is on a twin requirement i.e. existence for a philanthropic purpose and activities should not be for profit.

Hon’ble High court held that the institution is set up for charitable purpose as stated in the Memorandum of Association cannot be enough to hold that income is necessarily applied for charitable purposes. Writ Petition is accordingly dismissed.

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